August housing starts better than expected

Canada's housing starts jumped 15 per cent in August, substantially exceeding industry expectations, according to figures released Tuesday.

The Canada Mortgage and Housing Corporation (CMHC) said, on an annualized basis,211,000 new units were begunin August.That was a big increasecompared to the 186,500 new-home starts in July.

The news was even better considering that housing starts fell almost 14 per cent in July compared to June.Thus, analystswere worried that this sector, an indicator of economic expectations among consumers, was slipping rapidly.

Possible recovery

Instead, the August numbers show a housing industry that might be coming back, CMHC said.

"After a brief pause in July, the volatile multiple segment bounced back to a level of activity that is more consistent with our forecast for this year," said Bob Dugan, chief economist at CMHC's Market Analysis Centre.

Economists had expected some sort of housing jumpafter July's poor showing.

RBC assistant chief economist Paul Ferley, for instance,had predicted new homes to be up 4.6 percent in the month.And theBay Street consensus was for housing starts to hit 190,000 on an annualized basis.

In fact, the August figures indicated new-home starts growing at a rate three times faster than Ferley's estimate and a number 11 per cent higher than analystexpectations.

Still, the gains last month were not across all regions of the country.

Ontario gains

"Most of the volatility in housing starts over the last three months reflected swings in multiple starts in Ontario," CMHC said.

Indeed, Canada's most populous province saw its urban housing starts soar by 81 per cent, or 86,500 units. That was good news considering the slumping manufacturing sector and slowing overall economic growth in Ontario.

In the four other regions tracked by CMHC, however, fewer newhomes were started in towns and cities in August than a month earlier.

CMHC divides its analysis between rural and urban areas.

For the first eight months of the year, urban starts across Canada were up one per cent compared to the same period in 2007.

When youadd in new rural starts, however, the overall growth rate turns negative with the new combined number ofhousing starts down 4.3 per cent versus 2007.

More dataneeded

Thesemixed figures have economists seekingmore evidence that the housing sector is on firm footing before declaring an upswing in progress.

"On balance, this does not necessarily mean that housing remains healthy," Charmaine Buskas, senior economic strategist atTD Economics said in a research note.

"It should be taken for what it is a snapback from a previously large decline."